If you've been following the adventures of the US stock and bond market and the $US Gold price, you will have seen some interesting "paralells". Two weeks ago (May 10 - 14), US Treasury bond prices were on the verge of slipping below the trendline which had supported them ever since 1994 and US stock markets were on the verge of a serious relapse as the Dow closed below the 10000 level for the first time this year. And, of course, the Gold correction hit its bottom of $US 374.90 on May 13.
Since then, the stock and bond markets have "stablised", the pressure has switched to the US Dollar, and Gold has recovered. On May 27, it closed at $US 394.90, exactly $US 20.00 above its level of two weeks earlier.
So, with a month to go until the next FOMC meeting at the end of June, US stock and bond markets are once again at "safe" (or at least safer than they were two weeks ago) levels, the Dollar is down but still showing a gain on the year, and Gold has recovered about 38% of its April 2 - May 13 correction.
Gold's rise so far is mainly against the US Dollar. Since May 13, Gold is up 5.1% against the $US but 1.6% in Euro terms, 1.4% in Aussie Dollar terms, and 1.2% in Yen terms. So far, it's not so much that Gold has gone up, it's that the Dollar has gone down.
Here are the relative performances of $US Gold, the $US Index, and the Dow since Gold broke above $US 300 to stay on March 27, 2002:
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If you doubt that Gold's breaking back above the $US 300 barrier to stay in March 2002 was a "sea change" for world markets, a glance at the percentages in this table should settle the matter beyond all reasonable doubt. As you can see, that has not changed despite Gold's current correction.
You can see the first signs that this turnaround is "for real" on the daily bar chart above. With the price comfortably against both moving averages, the shorter-term (10 day) moving average (MA) has crossed above the longer-term (20 day) MA for the first time in about seven weeks. Also interesting is the big increase in daily volume this week - up until the shortened trading day on Friday, May 28.
On the weekly bar chart, after two weeks of solid rises, Gold has ended the week just below its longer-term (200 day) moving average. That MA now stands just above the $US 396 level with the shorter-term (100 day) MA standing at $US 400.70. Since the 100 day MA crossed above the 200 day MA back in mid 2001, it has not dropped below it again. To prevent that from happening this time, Gold is going to have to get back above the $US 400 level and stay there.
The point and figure chart is quite a pretty picture. You can see that the uptrend line (based in Gold's December 2001 lows) supported the price perfectly and that we now have a solid upmove above that line. The higher the present line of "X"s can stretch, the "safer" the coming downturn will be. Resistance between current levels and $US 400-402 - support at the line presently about $US 378-380.
Here's another perspective - a comparison between Gold's 2002 low and its present price and the $US index 2002 high and its present "price". All data is on CLOSING levels:
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This weekend is a long weekend in the US with no trading on Monday, May 31 due to the Memorial Day holiday. After that, we're into June with a whole month to wait for the Fed's meeting on June 29/30. The Dollar started to come under renewed pressure last week. This week, the pressure has increased. A month is a long time to wait for a "probable" US rate hike, especially since everyone knows that even if the Fed does raise, it won't raise nearly enough to make any difference.
Mr Bush's "approval ratings" are now down to levels from which no previous incumbent President has ever won a second term. The Neocons are fracturing as is the Republican party itself the angst rises about the Iraqi situation and the ranks split over the level of government spending and the size of the deficit.
At the end of June, the US has to pull off two impossible feats. The Fed has to raise rates enough to ease the pressure on the Dollar but not enough to slow down the present reported levels of US economic "growth". At the same time, the US has to turn "sovereignity" in Iraq over to an Iraqi government while still being in a position to "run" the country. Neither one will "work", either has the potential to upset the geo-strategic and economic/financial apple cart.
For the moment, things are "stable". Oil prices are back below $US 40.00. US stock and bond markets have come out of their slide. The US Dollar is falling, but so far only gradually. To keep all these balls in the air until the end of June will be a MAJOR achievement. To keep them in the air after that will prove to be an impossible dream.